Health insurance acts as a financial safety net during medical emergencies. Among the different coverages and features, there is a reward mechanism. No Claim Bonus or NCB helps increase the benefit of a policy without adding to the premium.
What is No Claim Bonus in health insurance? How does it work? How does it help policyholders? This article explores answers to these commonly asked questions and aims to provide a brief guide on how to best use NCB.
What is No Claim Bonus in Health Insurance?
A No Claim Bonus in health insurance can be described as a reward offered to the policyholders for having a claim-free year. This bonus increases or adds to the sum insured granted by the insurer without increasing the premium costs applying at policy renewal. It accumulates as a bonus with every consecutive claim-free year, reaching generally up to 50% to or more, depending on the policy terms of the insurer.
Types of No Claim Bonus
No Claim Bonus can be classified into two types.
Cumulative Bonus
This is a type of No Claim Bonus that increases the sum insured for every claim-free year at a stable premium. This is the most common type of NCB offered by health insurance companies to policyholders, providing them with extra coverage at the same premium. This type of bonus accumulates as a percentage with every consecutive claim-free year.
Some insurers may offer a type of enhanced or super cumulative bonus. This NCB is either offered as a bonus or sometimes as a rider to help individuals reach a higher sum insured within two to three years. It rapidly increases the sum insured by 50% to 100%, depending on the policy term, allowing the insured to gain extra benefits during the initial policy years.
Premium Discount-Based NCB
This type of NCB is rare in health insurance policies. Selective insurers may offer it. Instead of an increase in the sum insured, the policyholders get a discount on their next premium when renewing the policy. This NCB adds up to a maximum of 50% percentage with five claim-free years or more.
The following table highlights the key differences in the three types of NCB offered in health insurance policies. This table can help in comprehending what a No Claim Bonus in health insurance is and its types. The percentage mentioned in the table may vary for every insurer.
| Feature | Cumulative Bonus | Premium Discount-Based NCB |
| Benefit | Increases the sum insured | Reduces renewal premium |
| Impact on Coverage | Higher coverage over time | Coverage remains the same |
| Typical Rate | 5% to 10% per year | 5% to 15% per year |
| Maximum Limit | Usually capped at 50%–100% of the sum insured | Usually capped at 20% to 50% discount |
| Best For | Long-term coverage enhancement | Immediate premium savings |
| Effect After a Claim | May reduce or reset (as per policy) | A discount may reduce or reset |
How the No Claim Bonus Works
After knowing what a No Claim Bonus is in health insurance and its types, it is essential to understand how it works in a health insurance policy.
Increase in Sum Insured
No Claim Bonus is added as a percentage to the policyholder’s sum insured without increasing their premium. This bonus percentage is applied at policy renewal after a claim-free year. For a first claim-free year, the No Claim Bonus is usually added as a 5% or 10% percentage bonus to the sum insured, thereby increasing the coverage at the same premium cost.
For Example
Assuming a policyholder has a ₹ 5 lakh sum insured, and a 10% of No Claim Bonus is added at policy renewal. The sum insured for the renewed policy will be ₹5.5 lakhs at the same premium as the first year.
Premium Discount
No Claim Bonus is mostly added as a percentage increase to the sum insured in health insurance policies, but in some rare cases, it also acts as a discount to the renewable premium. This feature is usually found in motor insurance policies, but there are some health insurance policies that offer a No Claim Bonus as a discount to the following year’s premium without increasing the sum insured.
For Example
Assuming a policyholder did not make a claim for a year, the NCB acts as a percentage discount up to 10% to 20% to their renewable premium. This can be a beneficial reward for individuals seeking premium discounts for the same sum insured.
Key Benefits of No Claim Bonus
This section explains the key benefits of the No Claim Bonus and how it enhances your coverage.
- Higher Coverage Without Extra Cost: This is the most essential benefit of a No Claim Bonus, as it offers better coverage for policyholders when they make no claim for a year at a stable premium cost.
- A Shield Against Medical Inflation: Medical costs in India are rising exponentially, making a health insurance policy a necessary tool to protect your financial savings. A No Claim Bonus can be a helpful tool that enhances your coverage with every consecutive claim-free year and protects out-of-pocket expenses during unexpected situations.
- Financial Cushion for Major Illness: NCB might be a beneficial safety net that offers a protective hand when a hospital bill is more expensive than you expected. Especially in terms of critical illness and major surgeries, the increased sum insured can be an added benefit when in need.
What Happens to NCB if You Make a Claim?
When a policyholder makes a claim, regardless of the claim amount, the accumulated No Claim Bonus may reset to 0% percentage. NCB is a bonus offered to the insured when they don’t make a claim for a year or consecutive years, so when a claim is made, the increased sum will return to the base sum insured amount.
However, there are some policies that offer a partial reduction of NCB when a claim is made to prevent entirely losing the earned benefits. The feature of a No Claim Bonus in a health insurance policy may vary for every insurer, so ensure to carefully read the policy terms and conditions related to NCB.
NCB in Individual Vs Family Floater Plan
Here’s how NCB works in two different types of policies:
Individual Health Insurance
An individual health insurance plan offers coverage to the insured individual, giving policyholders the freedom to customize coverage based on their medical history and financial needs. No Claim Bonus is applicable under an individual plan and can even be extra beneficial with extended coverage.
Family Floater Health Insurance Plan
The sum insured under a family floater plan is shared by the members of the family added to the policy. A family floater can also have a No Claim Bonus that increases the sum insured at the same premium or applies as a discount to the premium. That said, the accumulated NCB can reset when any member of the family makes a claim.
When You Should Opt for NCB vs When You Should Make a Claim
A No Claim Bonus can significantly enhance your health insurance coverage, but it should be evaluated based on your needs and health profile.
You may opt for NCB:
- If you are young and generally healthy, with a lower likelihood of frequent claims
- If you plan to hold your policy long-term and want your coverage to grow over time
- If your base sum insured is moderate and you want to strengthen it gradually
- If you prefer higher coverage instead of paying for frequent policy upgrades
You may decide to make a claim:
- If you have existing health conditions and may need regular medical care
- If you expect to make claims frequently, NCB may reduce or reset
- If your base sum insured is already low, NCB may offer adequate initial coverage
- If the policy has strict reset rules or low maximum limits on NCB
Conclusion
Over time, No Claim Bonus can strengthen your policy without adding to your costs. However, it should be viewed as an added benefit rather than the primary factor in choosing a plan. Selecting the right base coverage and understanding policy terms remain equally important to ensure complete financial protection.
FAQs
What is the NCB rule?
The conditions of a No Claim Bonus are that it generally resets to 0% when a claim is made and reaches a certain maximum percentage of 50% to 100% if no claim is made, depending on the policy terms. It acts as a bonus and increases the sum insured by a certain percentage or applies as a discount to the renewable premium.
Can I withdraw the No Claim Bonus?
A No Claim Bonus can be withdrawn when a policyholder makes a claim. It is a bonus offered to the insured when they don’t make a claim. When a claim is made, the NCB resets to zero or is reduced partially based on the policy.
How can I check my No Claim Bonus?
A policyholder can check their No Claim Bonus in their respective policy documents, via the online portal or app of the insurer, or by contacting the customer care support of the insurer.
Can I protect my No Claim Bonus?
Yes, you can protect your No Claim Bonus either by not making a claim or by purchasing a No Claim Bonus protection add-on that is offered by many insurers. This add-on will protect the accumulated NCB when a claim is made.
Is the No Claim Bonus applicable for both individual and family floaters plans?
Yes, a No Claim Bonus is applicable for both individual and family floater health insurance plans.